The Securities and Exchange Commission announced today that on September 25, it obtained emergency relief against Stephen W. Carnes, Lawrence A. Powalisz, their companies K&L International Enterprises, Inc., Signature Leisure, Inc., and Signature Worldwide Advisors, LLC (collectively, the Stock Distributors), as well as Jared E. Hochstedler and Enzyme Environmental Solutions, Inc. (Enzyme Environmental) The Honorable Gregory A. Presnell of the United States District Court for the Middle District of Florida entered a temporary restraining order (TRO) enjoining all defendants from violating Sections 5(a) and (c) of the Securities Act of 1933. Judge Presnell also ordered an asset freeze against the Stock Distributors and temporarily prohibited them from participating in any offering of penny stock.

The SEC’s complaint, filed on September 24, alleges that the defendants engaged in an ongoing scheme to evade the registration provisions of the federal securities laws by selling billions of shares of stock issued by microcap companies to the investing public without adhering to the registration requirements of Section 5 of the Securities Act. According to the complaint, the scheme involved a series of transactions between the Stock Distributors and the microcap companies, including Enzyme Environmental (the Issuers), with the same essential characteristics: First, a Stock Distributor either purported to lend money to an Issuer or the Issuer identified a “debt” owed to its officer that the Issuer and officer assigned to the Stock Distributor. Second, to reduce or eliminate the loan or the assigned debt, the Issuer issued shares of its stock to the Stock Distributor. Third, before or after the stock issuances, the Stock Distributor paid the Issuer or an affiliate of the Issuer. Finally, the Stock Distributor immediately sold the shares into the public market. In two years, the Stock Distributors generated approximately $7 million in illegal profits the complaint alleged.

In addition to the emergency relief already obtained, the SEC is seeking permanent injunctions, disgorgement of ill-gotten gains, and civil penalties against all defendants. The SEC is also seeking penny stock bars against the Stock Distributors.